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Old 09-24-2010, 02:52 PM   #61
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Originally Posted by rescueme View Post
?

Who would ever go down that path?
I guess people who buy annuities!
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Old 09-24-2010, 03:28 PM   #62
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Originally Posted by 73ss454 View Post
I guess people who buy annuities!
SPIA? Yes. Term Life insurance? Yes. Deferred Annuity? No. Variable Annuity? No. Whole life? No...
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Old 09-24-2010, 03:35 PM   #63
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You may catch on to this yet!
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Old 09-24-2010, 03:58 PM   #64
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Looking for a little help on our retirement drawdown plan.

Weve been going through the accumulation phase, for the most part lock into the company provided 401K selections. Between the both of us weve saved about 1.1 million, combined in taxed deferred 401K & tax free ROTHS. We need about 32K annually out of the portfolio to live, for us, very comfortably. Im younger than my wife and overall were looking a making sure the portfolio lasts 40 years.

Heres what Im thinking about & Im looking for input on why or why not it wont work.

a. Invest 600K into a dividend producing fund that keeps a pretty consistent price and has a yield in the 3% range = 18K annually
b. Invest 400K in a broad market indexed funds and draw 14K inflation adjusted from principle annually.

In retrospect the accumulation phase of retirement planning looks pretty easy, Im struggling with the draw down phase. Were not looking to necessarily leave a finacial legacy behind but we also dont want to run out of money. The idea of a reliable dividend income stream is attractive to me but I'm wondering what others have found works

Sorry if this is too basic or off topic
Willift
It looks like you're in good shape. I'll mention one other thing that I don't see in the comments so far.

You'll be starting SS 7-15 years from now. Presumably, you'll want bigger withdrawals from you personal accounts during those 7-15 years than later. (You didn't mention this, and I'm not sure why you didn't.) This aggravates your risk of a down market soon after you retire, since you'll be withdrawing more.

Someone as risk averse as I am would move some money to something that has very low market risk. If my SS benefit @62 is $15,000, I might put 7x$15k = $105k into CDs and TIPs. The remaining $900k in the investment portfolio now needs to support $15k less in annual withdrawals in the early years. Choosing the latest age, that SS benefit would be $26k if started at 70 (nearly your $32k bogey). That would require a carve out of $390k, leaving $500k to support the remaining $6k of annual withdrawals.

Yes, I know that if you're pretty certain you can earn a COLA'd 3% in dividends on a stock fund with a consistent (preumably inflation adjusted) price, this is a silly idea. It's just that I'd be nervous about that assumption.
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Old 09-24-2010, 04:03 PM   #65
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Only 2 companies offer COLA annuities in my state; their bids were about 7% apart, and both quite a bit higher than the comparable required payback and payments missed for an equal added annuity amount from social security.
I'm not sure exactly how to read that. Are you saying you're money ahead by buying the private SPIA vs. deferring SS, or that deferring SS beats the private SPIA?
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Old 09-24-2010, 04:39 PM   #66
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.

You'll be starting SS 7-15 years from now. Presumably, you'll want bigger withdrawals from you personal accounts during those 7-15 years than later. (You didn't mention this, and I'm not sure why you didn't.) This aggravates your risk of a down market soon after you retire, since you'll be withdrawing more.

Someone as risk averse as I am would move some money to something that has very low market risk. If my SS benefit @62 is $15,000, I might put 7x$15k = $105k into CDs and TIPs. The remaining $900k in the investment portfolio now needs to support $15k less in annual withdrawals in the early years. Choosing the latest age, that SS benefit would be $26k if started at 70 (nearly your $32k bogey). That would require a carve out of $390k, leaving $500k to support the remaining $6k of annual withdrawals.
I quess I was being conservative on the 2nd SS. If the bride dies before I'm 62 I'd look at spousal benefits until I was 70. If things go as planned and she's still around then that would be $$ we could look at. Anyway from this point we'll need 32K approx.

You kinda lost me on the need for the CD
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Old 09-25-2010, 01:02 AM   #67
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I'm not sure exactly how to read that. Are you saying you're money ahead by buying the private SPIA vs. deferring SS, or that deferring SS beats the private SPIA?
Under current conditions, deferring SS beats the private annuities, by a considerable margin.

Ha
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Old 09-25-2010, 02:06 AM   #68
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Got it - thanks Rich.

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The most common issues include huge management fees, resulting in poor net performance, immediate locking up of a large premium with early withdrawal penalties, carrier solvency risk (at least theoretically).
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Old 09-25-2010, 06:27 AM   #69
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Hello Chinaco - do you have annuities ? I would like to understand more precisely how they work (i.e. taxes, fees, etc.). In my opinion, annuities sound like an ideal financial product when I reach 62.

I do not have a SPIA. I am still working. I will get a small company pension (non-COLA). DW will take SS at 62. I am intending to defer my SS till FRA or 70.

I am mindful that there are many many things that can happen over the course of a lifetime that can jeopardize one's financial well being. I have been considering using some of our assets to purchase a SPIA to build a base income to support our basic lifestyle. The reason is to reduce risk and try to ensure that our (and the survivor's) lifestyle is not in jeopardy.


But I am going to wait to see what happens with interest rates. Till that time, I will use assets to provide income during ER.


There are many factors that need to be considered to determine if a SPIA is a good idea for an individual or couple. I would not recommend making a hasty decision. Educate your self about your options for funding retirement.


Every financial decision entails some sort of risk. One of the biggest issues is lack of information and knowledge when making decisions.

And while forums like this are good for comparing notes... do not take any information on blind faith!!!

Educate yourself. There is plenty of good books at public libraries about retirement planning, basic investing, annuities, etc.
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Old 09-25-2010, 04:36 PM   #70
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Under current conditions, deferring SS beats the private annuities, by a considerable margin.

Ha
Thanks, that's what I thought.
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